Banks hurry to clear issue's rump and earn their fees

Dealers at Credit Suisse and rival JPMorgan Cazenove were hitting the phones early this morning as they set about clearing the rump of mining giant Rio Tinto's £9.2 billion rights issue.

A total of 524.4 million shares were issued originally on the basis of 21-for-40 at 1400p a share.

Shareholders took up 508.5 million shares, or 96.7%, leaving 15.88 million shares to be found a home.

So Credit Suisse and JPM were called upon to earn their fees and shift the remaining shares.

They began the process of an accelerated bookbuilding programme among institutional investors. The shares were quickly placed at 2100p and were oversubscribed.

Rio Tinto, down 44p at 2114p, needs the extra cash to reduce its huge debt burden by at least $20 billion (£12.2 billion) within the next couple of years.

The rights issue was chosen after the miner eventually rejected a plan for its biggest shareholder Chinalco to inject $19.5 billion in return for increasing its stake from 11% to 19%.

Rio is also planning a number of asset disposals and has formed a joint venture with the world's biggest mining outfit BHP Billiton, 19p off at 1406¼p.

An offer of around 6000p a share from BHP was rejected by the Rio board last year as too cheap.

Elsewhere in the mining sector, Xstrata drifted 1.9p to 695.1p despite Morgan Stanley jacking up its price target from 855p to 1160p with an overweight rating.

It has also raised Kazakhmys, 2p lighter at 660p, from underweight to equalweight and lifted its target for Antofagasta, 1p off at 625½p, from 507p to 641p.

Bid target Anglo American, down 32p at 1800½p, is rated equalweight, up from 1315p to 2117p. The biggest move, however, is reserved for Vedanta Resources, 15p lower at 1400p, from 710p to 2312p.

Shares generally came in for profit-taking in the wake of yesterday's gains.

Investors were aghast at the US non-farm payroll numbers, which came in more than 100,000 above the worst estimates.

But with Wall Street closed tomorrow for the Independence Day celebrations, selling was limited. The FTSE 100 index fell 73.15 points to 4267.56.

Brewer Marston's crept higher despite the apparent reluctance among some institutional investors to back the group's £176 million rights issue, the proceeds of which will be used to pay down debt and finance the development of new pubs and restaurants.

Some of them complain that the terms are too expensive to support a plan for organic growth.

Now there is talk that rival Greene King might attempt a bid for Marston's.

Greene King, which boasts an impressive portfolio of ales, including Abbot and Old Speckled Hen, is not averse to making takeovers and has done so consistently over the years.

In April, it became the first pubs chain to test the water by raising £208 million via a rights issue.

The money will be spent "cherry-picking" pubs from struggling rivals to add to its 2500-strong chain, but might also be used to help finance a takeover of Marston's.

Greene King reported a 15% drop in profits last year to £118.5 million. KBC Peel Hunt responded by raising its rating from hold to buy, while Numis Securities has repeated its add rating and raised its target from 440p to 460p. Investec has moved from sell to hold.

Intermediate Capital Group surged 40p to 527p after tapping shareholders for £351 million by way of a seven-for-two rights issue at 121p.

The company wants the money to take advantage of company buyouts that might occur.

African Minerals has capitalised on the recent strong run by its shares to get extra cash. It has raised £64 million by way of a placing of 25.5 million shares at 250p each.

It wants the money to undertake more drilling at its Tonkolili iron ore project to establish further reserves of up to 10 billion tonnes.

It also wants to start drilling with the objective of delineating one billion tonnes of iron ore in the cap overlying the magnetite deposits.

Advertising agency Aegis fell 3½p to 88¾p after Cazenove dropped its rating on the shares from outperform to neutral with a 92p target.

Trading conditions remain tough and the next set of results are unlikely to inspire.